Wyndham, KfW sell bonds, issuance uptick expected; Wyndham gains; Smith better on acquisition

By Andrea Heisinger and Cristal Cody

New York, Feb. 22 - Hospitality company Wyndham Worldwide Corp. and Germany's KfW were the two issuers braving the high-grade market on Monday.

Both were unconventional offerings, with Wyndham split-rated and KfW a quasi-sovereign.

The hotel and resort operator Wyndham sold $250 million of 10-year notes by mid-afternoon.

KfW priced $1 billion of three-year global notes early in the day.

The market's tone was described as "blah" by one source, and "flat" by another, who added that "things should pick up tomorrow."

Issuance has been minimal for the past two weeks as market conditions have kept borrowers on the sidelines until conditions and new issue concessions improve.

This week could see slightly more volume, which wouldn't take much since the previous week boasted a mere three bond sales.

Secondary trading got off to a slow start but gained traction by the end of the day, according to sources.

For example, the CDX Series 13 North American high-grade index was unchanged at a mid bid-asked spread level of 91 bps, according to a market source.

Meanwhile, overall Trace volume added about 20% to close out at nearly $12 billion in trading, according to a source.

"Overall, it was a very quiet day," one source said.

Treasuries were weaker. For example, the yield on the 10-year benchmark Treasury note eased 3 bps to 3.80%, and the yield on the 30-year Treasury bond weakened to 4.73% from 4.70% on Friday.

In trading, Wyndham Worldwide's new notes saw life, gaining in the secondary, while activity picked up in Smith International, Inc.'s 9.75% senior notes due 2019 after the company said it would combine with fellow Houston-based oil and gas services company Schlumberger Ltd. Smith's notes tightened on the news.

Elsewhere in secondary trading, the financial sector firmed overall by another 5 basis points on Monday, with paper from Bank of America Corp., Citigroup Inc. and General Electric Capital Corp. posting stronger gains, according to a source.

Wyndham prices split-rated deal

Wyndham Worldwide priced $250 million of split-rated 7.375% 10-year unsecured notes (Ba1/BBB-) to yield 7.375%, an informed source said.

It priced at the tight end of guidance for a yield in the 7.5% area.

The sale was "multiple times oversubscribed," the source said. It was marketed at a yield, he added, although a spread of Treasuries plus 357.2 bps was also calculated.

Bank of America Merrill Lynch, Credit Suisse Securities, Deutsche Bank Securities and J.P. Morgan Securities ran the books.

Proceeds are being used to repay debt.

The hotel and hospitality company is based in Parsippany, N.J.

New deals set to flow

It will not be a blockbuster week for new deals, but there should start to be a slight influx by Tuesday, two sources said late in the afternoon.

"I'm hearing away that there are a few things out here," one source on a smaller desk said. "We have a couple of things we're working on, but just waiting to give the go call."

It was hard to tell if there was much shift in market sentiment on Monday due to the lack of deals.

"There weren't really any [new deals] to go off of," a market source said. One was the sale from Wyndham, which despite being at least partly priced off high-grade syndicate desks, was split-rated. And sales from KfW are often not watched by those who mostly pay attention to corporates.

Deals for the week are expected to be "on the corporate side," the market source said. Bond sales from the financial sector have been mostly absent since the beginning of 2010.

"It was pretty dead today, but that's not a bad thing," the syndicate source said. He was referring to the lack of negative headlines that have plagued the new issue market and mostly kept issuers from entering the high-grade market.

KfW sells $1 billion

German government-owned development bank KfW sold $1 billion of 1.875% three-year global notes (Aaa/AAA/AAA) early in the day at par to yield 1.875%, according to an FWP filing with the Securities and Exchange Commission.

Bank of America Merrill Lynch and Goldman Sachs & Co. ran the books for the Frankfurt-based issuer.

Wyndham gains in trading

Wyndham Worldwide's new 7.375% split-rated notes due 2020 performed well in the secondary, according to traders.

The $250 million of notes priced at 99.998 on Monday. The notes were seen by traders at 100.625 bid near the market close and were "quoted right before that at 100.50- 101.00," one trader said.

The notes were "trading on price, not the spread," the trader said.

Smith tightens

Deal news moved Smith International's outstanding 9.75% senior notes due 2019 on Monday. The notes firmed in secondary trading on the stock acquisition valued at $11 billion with Schlumberger, according to a source.

"I saw the Smith '19s offered at 105 bps plus Treasuries [but] it doesn't look like they traded there. The bonds Traced at 125 bps," a source said.

On Friday, the notes were offered at 167 bps over Treasuries, according to the source.

Smith also has existing 8.625% senior notes due 2014, but no trading activity was seen in the secondary in those securities.

Financials firm

The financial sector continued to tighten for the fourth straight trading day on Monday, continuing a trend from the previous week, according to sources.

"Financials are still tighter - probably safe to say another 5 bps," one trader said.

Some paper posted even stronger showings on Monday.

For example, Charlotte, N.C.-based Bank of America's 6.5% notes due 2016 tightened to 146 bps over Treasuries on Monday from 158 bps over on Friday.

Also, New York-based Citigroup's 5.5% notes due 2014 firmed 12 bps to 250 bps over on Monday.

In addition, General Electric Capital's 5.625% notes due 2018 tightened to 158 bps on Monday from 165 bps on Friday.

The Fairfield, Conn.-based company is the financing division of General Electric Corp.

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